Paychex Up 4%: FYQ3 Beats, Raises Year Profit View

By Tiernan Ray

Shares of payroll processing firm Paychex (PAYX) are up $1.83, or 4.4%, at $43.75, in late trading, after the company this afternoon reportedfiscal Q3 revenue and earnings per share that beat consensus expectations, and raised its forecast the full year’s profit.

Revenue in the three months ended in February rose 5%, year over year, to $636.5 million, yielding EPS of 44 cents.

Analysts had been modeling $629 million and 42 cents.

CEO Martin Mucci said the company was “pleased” with its progress in the quarter, commenting:

Payroll service revenue growth continued to advance, led by core payroll results, while Human Resource Services revenue benefited from demand for our human resource outsourcing solutions. We continued to experience good new business revenue growth, particularly in core payroll and Paychex HR Solutions. Product investment in our software-as-a-service solutions and mobility applications continued with new product releases that position us for long-term growth, while we maintained strong operating margins.

The total revenue figure includes $626 million of service revenue, up 7%, plus $10.5 million in interest on funds held for clients, down 3%. That compares to analysts’ estimates for $618 million in service revenue and $10 million in interest.

For the full year, the company sees service revenue rising 5% to 6%, which is roughly in line with expectations on the Street for growth of 3.7% in payroll service revenue and 11% in human resources service revenue, according to data provided by Factset.

Net income is expected to rise 9% to 10%, That is up from a prior forecast of 8% to 9% growth, offered back on December 19th, and above consensus for an 8% increase.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.